I Believe I Said That…

I picked up a link today that led me to a story about Wal-Mart executives calling the Company’s current stocking problem a “$3 billion opportunity.” I call it to your attention because this may be the most amazing piece of spin I have ever seen, and certainly the best I have seen in years. Anyone reading this quote (or the associated headlines) would most likely get the impression that senior management has identified new methods or policies regarding inventory control, inbound logistics, and internal distribution that will increase sales by as much as $3 billion each year (if not more)! Unfortunately, the truth is the executives running the Company have finally realized that if customers can’t find the product they want to purchase because there isn’t any on the shelves, not only will they not purchase it, but they will (eventually) get mad enough to take their business elsewhere. This might still be cheerful news, except the reason for Wal-Mart’s chronic out-of-stock conditions is the lack of personnel available to load more products onto the shelves – and that is the direct result of senior management attempting to squeeze more money out of each store by refusing to hire enough workers or employ them full-time…

You can pick up the original story on Bloomberg News if you want to; it has a lot of backup financial data and some really interesting quotes from some of the managers involved, but the basic story is clear enough. Over the last five years Wal-Mart has opened about 650 new stores, while at the same time their overall number of employees has dropped by about 20,000. Or, to look at it another way, during this period the total number of stores has increased by about 17% but the total number of people working in the stores has dropped by about 2% - a net loss of staffing that approaches one-sixth of the total hours available to keep a store running. As a result, there aren’t enough people to keep the shelves filled, resulting in an estimated $3 billion in lost sales – unless those numbers are net, rather than gross, in which case the company is actually losing $3 billion a year in revenue…

Now, as bad as that is, it’s still only part of the problem. Almost as serious as a lack of personnel is the issue of your available workers performing badly, and one of the key factors that can lower performance is stress – such as that of being yelled at by irate customers who can’t find the products they want, or of having to cover the responsibilities of multiple workers because management won’t hire enough people to get the job done, or not having the proper training to complete tasks because there’s no time to train people because of the artificially inflated work load, and so on. In fact, anything you do that makes working conditions worse will lower morale, making your existing employees less effective, and making your problems even worse. All of your best people will leave to find better jobs (or at least less awful ones) as soon as possible, resulting in positions that automatically select for the worst possible candidate, and the cycle will continue until you have no one available who can actually do the job, which will in turn result in unions forming, billions of dollars of sales being lost, or frequently both…

Readers of this blog (assuming I have readers) will recall that for years now I have been writing that any human resources policy that degrades working conditions will have a direct negative impact on revenue and profitability through lower employee performance, greater turnover, and a corresponding decline in the quality of the work force. I have never written about what would happen if a company’s hiring policies were so absurd that they did not hire enough people to keep their shelves filled because I could not imagine anyone stupid enough to do such a thing. But apparently somebody was, and it would seem that their idiotic staffing policies have gotten bad enough to where they are costing the company more money each year than 3,000 average people would earn in a lifetime…

I can’t speak for any of Wal-Mart’s stockholders, of course, but if the senior management of a company I owned shares in were trying to pass off a $3 billion blunder as an “opportunity” I might just be tempted to go to that year’s General Meeting and start demanding some answers – or hire a lawyer and start demanding that someone be held accountable for this total incompetence. I’ll keep you posted on this story while we wait to see what management does about the situation – and whether or not it helps…